Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure

The document argues that National Development Banks (NDBs) are ideally positioned to bridge the financing gap for climate-smart urban infrastructure due to their local knowledge and proximity to cities. However, it notes that only 4% of Public Development Banks are specifically mandated to finance local governments. The research identifies barriers across policy, institutional, and financial levels—such as restrictive legal structures, lack of bankable project pipelines, and insufficient capitalization. To address these, the authors introduce an 'NDB Maturity Model' consisting of twelve dimensions across strategic, financial, business, and operational parameters. The brief recommends that national ministers update NDB mandates to include climate focus, reassess legal structures to allow for higher risk and longer tenors, and integrate NDBs into national climate goals and infrastructure strategies. A case study on Indonesia's PT SMI and the 'SDG Indonesia One' platform is provided as an example of using blended finance to implement SDG-oriented infrastructure projects.

• There is a significant investment gap in climate-smart urban infrastructure, with annual needs estimated between US$ 4.1-4.3 trillion from 2015 to 2030, and an additional US$ 0.4-1.1 trillion per year required to make this infrastructure low-emissions and climate-resilient.
• Despite their potential, very few National Development Banks (NDBs) have the specific mandates required to support local governments or green infrastructure, with only 4% of Public Development Banks mandated to finance local governments.
• NDBs face three primary categories of barriers to providing climate-smart urban financing: policy, legal and regulatory barriers (e.g., restrictive legal structures and unspecific mandates); institutional barriers (e.g., lack of sectoral expertise and weak internal capacity for technical assistance); and financial barriers (e.g., insufficient capitalization and limited access to innovative capital).
• The proposed NDB Maturity Model evaluates an NDB's capacity across twelve dimensions divided into four parameters: Strategic (legal structure, mandate, policy role), Financial (equity size, innovative capital, resource mobilization), Business (project design, de-risking instruments, sectoral expertise), and Operational (intermediary status, monitoring indicators, strategic partnerships).
• Indonesia's PT Sarana Multi Infrastruktur (PT SMI) and the Ministry of Finance established 'SDG Indonesia One', a blended financing platform that uses development, de-risking, and financing facilities to reduce transactional costs and increase the implementation of bankable, SDG-compliant infrastructure projects.

APA

Harb, S., Smallridge, D., Hodson, G., Gough, J., & Yang, K. (2021). Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf

Chicago

Harb, Sara, Diana Smallridge, Glen Hodson, Jonathan Gough, and Kristiina Yang. Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf.

Wikipedia

{{cite report |last1=Harb |first1=Sara |last2=Smallridge |first2=Diana |last3=Hodson |first3=Glen |last4=Gough |first4=Jonathan |last5=Yang |first5=Kristiina |title=Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure |publisher=Climate Policy Initiative |date=March 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harb2021leveraging, author = {Harb, Sara and Smallridge, Diana and Hodson, Glen and Gough, Jonathan and Yang, Kristiina}, title = {{Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure}}, institution = {Climate Policy Initiative}, year = {2021}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-Ministers-of-Finance-Environment-Climate-Change-Infrastructure-Urban-Development-of-National-Governments.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }